BHE - Earnings call transcript Q1 2019 | Benchmark Electronics, Inc.

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Operator

Good day, and welcome to the Benchmark Electronics Incorporated First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lisa Weeks, Vice President of Strategy and Investor Relations. ahead. go Please

Lisa Weeks

and and and for operator, second first me outlook. everyone joining provide our review and for afternoon, provide detailed Jeff Thank overview a comments, an first thanks results and quarter quarter quarter today of President; CEO Benck, Benchmark’s have quarter With our Lakkaraju, XXXX us and CFO. I will results you, first Jeff to Roop introductory earnings of this will call. Roop

today a performance Investor presentation release, website and Q&A X call on available first be the moment take our this under of being closed, to section we forward-looking earnings is prepared After call that XXXX, review online conclude Please at an advice market presentation. reference This presentation following live, on highlighting available and call. Slide will replay our webcast We the a in the a with will the we have call. quarter for The session. are the we a and www.bench.com. issued press financial online will our the Relations statements release

our information. call, forward-looking we During will discuss

measures GAAP in non-GAAP update the statements. as company The of to a any that statements the as historical involve results may forward-looking are are of obligation any and these today’s a from of press which of described presentation. Benchmark risks forward-looking SEC undertakes not our to appendix no statements, in uncertainties statements, filings. has Actual provided As fact and our reminder, earnings and remarks the reconciliation well in releases differ materially release

presentation, Benck. the over turn please to to our the I now will turn Jeff will call you CEO, Slide X If in

Jeff Benck

for the bring richer companies we I first we of everyone working our the excited with Benchmark experiences can extended engineering the and And as joining leading product call. great and had that here increase the that customers. a privilege navigate this Lisa, Benchmark. great to I’m my with Thanks, a team. before help deliver set month the technology it’s offerings and been to of background, underway, joining through a number transformation to afternoon’s provide value welcome be company of I’ve business to us

increases and guidance computing. traditional share and and I above comparable provide the In ending Telco our or is of a year-over-year Medical areas observations the higher-value first quarter the turn XX, my revenue X. I is Before Slide non-GAAP initial March revenue by focus, $X.XX, of first of overview assisted midpoint will of results. XXXX. at delivered by markets, both A&D EPS XXXX headwinds, $XXX with driven semi-cap XXXX, and of million in our the brief increased Even range. legacy quarter Revenue to of in we demand to Please quarter

days. range first and cash to to expect continue operations the the to we the million quarter, in which days operating within range in of quarter, XX million. $XX XX in Cash cycle Our non-GAAP & the XX down markets, improved which higher-value sequentially cash despite X.X% Test market continued was basis our contribution XXXX. gross first the conversion is in The XX% to of was XX was flow full-year target $XX part margins $XX of million the approximately points was from and quarter from on from softening sector semi-cap, Instrumentation of bigger

to will cover continue our more which strategy, detail. capital Roop allocation on in We execute

time I’ve been side-by-side capabilities, our complexity and for and a of problems working share are our company. company differentiated spending last I’ve of firsthand me our let unique some business. customers’ with turn needs, joining the we the Slide our Please technical about customers. deep Now, understanding solving team Since our to priorities of and a month, and customers have initial gain the I X. state to better experienced appreciation with the observations

exit remains higher-value markets think the was by As years strategy we focus roughly unchanged. legacy the XX-XX. traditional our Benchmark between higher-value this at later markets, contract be announced the about forward, on going be ratio. will XX% computing company’s we ago, will higher Five our EMS and year, mix sector which and the target traditional markets markets completed our that After value is XX% revenue mix

Another key providing technical rich strategy is our solutions. element of

diverse in in product solution. of cases opportunity us rely us to provide may their front some a concept services means customer more to provide our production, This taking development have and engineering to higher-value customers idea where We on be from across complete base an team.

have As you wins. and where positive EMS where between we provide a might services enjoy seen correlation we we expect, engineering

we help motivated value to market. more add So their and speed time customers to are provide

We and blocks. have IoT our capabilities solutions. with in been opportunities, connectivity centers and in also technology group, on capture Based feedback Lark our to investing design RF building align which component customer new Technology Secure

we capabilities awareness. market, raise to these have bring we to customer to As new continue

bringing in FDA the For the surveillance I to bring developing we’re aware for the maybe protection effectively and our require components example, matters, or industries you’re capabilities it communicate when amazing in aircraft of some that border our applications, Even product up tenure customers. developing tagline want products I’ve Benchmark, in approval the systems light ultimately These demanding using will or customer, that here, yet of end space. team the most or and on some with and to table depth across even me go for we whether our the a medical make cut an by I to been fully of customers. collaborating this with projects I’m the impressed wasn’t my Benchmark we short of sure

and have manufacturing partner application. these your the can You design thrive have confidence the of to environments. handle criticality that in We

customer can our For need more. we that and I meetings, heard have my some first of help do they

together customers needs will build the plans sure the customers near-term future. or our companies believe we the We capital allocation in understand also put for make engagements collaborative capabilities place are I work will to all our in of plans the outsourcing co-development breadth appropriate. and in that full support

tuck-in business technical capabilities. grow continue the investments will to our fund in CapEx and expand to We to invest

We will quarterly our opportunistically maintain shares dividend. and repurchase

and is While to some remain near-term strong, meetings level in on our the meantime, coming the strategy on. as we’re market, would visibility these facing semi-cap get dealing the timeline. not to recovery our with head we better where challenges have are near-term from a recovery headwinds fundamentals In executive transparent the business of I the perspective as like. we scheduled weeks

the cost this We have line capacity given to delayed actions segment. of and are evaluating further recovery current demand

and new win For programs. the to long-term, we we remain positive semi-cap continue on

the to differentiated serve customers in have We market. this capabilities

pursuing efficiency are the we semi-cap, savings Beyond margins. our network gross global operational across to expand

which margins, will kicked in look months. number have off accelerate improve to a We the projects productivity and to coming further of we transformation

more are significant new new to and growth greatest in To our achieving years. organization program company we been technology of is acquisition, relatively with for our past to the offer and across We customer build and areas, near-term, Benchmark the can execution revenue only be evaluating deliver to certainly that through view balance In has The progress feel near-term return. prioritize the understand turn couple revenue. benefit reviewing but made with that those greatest I investments this has out will results. provide eye do our towards an enable even to Slide that I to X. customers the those I potential approach our please focus go-to-market

bring In so priority across prospective I former a improve customer this same top needs solutions to customer engagement company with service we to and is Benchmark, and maximum priorities. to and and our suggestions Our customer customers’ I anticipate my value of insights are to need our the all service the and perspective and a add offerings. process. sectors our provide areas, to ensure offerings have aligned can tailored been customer’s technology

to bookings, right support to win coverage ensure and explicit will revenue. we efforts. existing and engagement be staff to sales drives new we my the tighter The customers is the to leader new for focus Next, our organization sufficient critical to have I to which bring continuing with go-to-market will opportunities. alignment go-to-market prospects adding organizational

While review I in conversion, focus a XX we have increased success revenue parallel have bookings to which the past must the also months, intend further. we had on

is of revenue of our given nature some qualification the program than design instances, timing That in ways conversion there we conversion had control. complexity anticipated. of the wins. and within said, the being greater slower are are leading influence edge are In can delay our Some ramps production we that

evaluate will focus the product believe also center for While design of new our go-to-market efforts. we seek lifecycle the help part customers and take marginal attrition. with I Coupled our more execution also and opportunity in will go-to-market, extend optimizing of there contracts, and on role must existing dilutive review further programs program of the we greater our a continue on these business efficiencies. to opportunities process products, we to is

We are their our assessing organization our the experience forefront experience entire uniform customer and is network. to of customer needs more global remain overall at the ensure across the

excellence. that We are accelerating process then is standardization, focus team operational we results. driving optimal Their on global have for a ensures until executing

utilization We will network. transformation be driving across – transform laser-focused on efficiencies. our design This includes and greater manufacturing

ensure to fully operational also in becomes RF we quarter. Tempe design Lastly, this our high-speed and want center

call Now, for discuss I results Roop over the the quarter. turn our financial to to will

Roop Lakkaraju

Jeff, afternoon, you, and good Thank everyone.

for will to systems. with in vibration booking XXXX for new a award both believe $XXX with delayed to total diseases, team first wins the XXXX. who quarter, bookings the the range were Before and awarded solid infectious Slide The autonomous QX systems bookings advanced of management of of were XX% to want for recap that new Please that programs is strong medical for for were Jeff Bookings target million. our wins of We were two vehicles of the Benchmark decisions and program engineering were million where customer services. we quarter considering $XXX control from in I family. discuss again the of design for the provide for Industrials full-year into and the were on QX a diagnostic sensor new million. the turn X. XX% modules We $XXX electronics behalf bookings. welcome company entire for

Another new to for programs system an win new drug existing designs space technologies. in for semi-cap related notable – continue medical to win the new advanced is delivery a the We T&I, we customer.

QX program with for XX for for wins were wins up XX were the ground combined Wins vehicle high-end new customer existing quarter, and had We engineering. a for include manufacturing and A&D new modules. telco with and quarter. aircraft awarded an existing devices expand computing. total to continue customers. telco the customer next-generation Computing and XX for program We XX% a a electronics display, programs new with We with security

of guidance quarter discussion Revenues for million million. Slide midpoint our a XX summary. our to $XXX the $XXX Moving million of to above of first $XXX XXXX were of financial

Our GAAP was EPS the quarter $X.XX. for

GAAP customer $X.X associated million also Our other from proxy due of of and $X.X from million included Of the bad the recovery activity, restructuring million debt of million to the and settlement. with various restructuring of was costs write-down expenses our insolvency. inventory, and received $X and recent the recoveries was recovery $X.X of amount, results $X.X expenses part legal recovery recent in activities site million funds from

XX of was to point a expenses. of $X.XX revenue decline due guidance $X.XX slightly EPS comp was Our Non-GAAP $X.XX. range X.X%, our QX the non-GAAP at and operating lower midpoint to of higher margin stock quarter-over-quarter basis

by three renal in and revenues For market Industrial XX the X% to points sequentially expectations points quarter we’re communication and single-digit the semi-cap for demand and from down represented by XX% products broader the Test turn quarter, to sector. driven our the increased first year-over-year. and Slide quarter X% X% the military quarter changes. revenue due Please aerospace ROIC X% of first March XXX sequentially decreased flat basis our with versus demand XX. were growth line we’re quarter for revenues X% down throughout the basis & commercial from year-over-year our were security and sequentially higher-value down products. devices year-over-year revenues changes. ended the for X% late-quarter XX sector from A&D Revenues increased for seasonality. months declines in markets Instrumentation up for year-over-year, was our and from X.X%, down were for first and expectations demand revenues Overall, sequentially low Medical year-over-year. first imaging XX% and year-over-year revenue declined and

from customers, sequentially in-quarter Turning up but Computing was demand X% products due growth X% forecasted XX% than markets. quarter-over-quarter seasonality. XX% ramps Telecommunications new storage in and year-over-year up now year-over-year was and better traditional sequentially to up from expected and from with certain our increases. to satellite down program broadcast as

Our down last up sequentially. traditional were our markets, which represent first XX% quarter and XX% from revenues of year XX%

and our of higher-value represented legacy QX computing XX% end XX%. at the markets the XXXX markets represented contract, Excluding traditional

turn of of Our decline Gross sequential XX% business Slide for for quarter year-over-year top XX to customers reduction computing X.X%. corporate Year-over-year X.X%, Instrumentation gross non-GAAP attributable above for XX margin a margins represented Please gross average. trends. basis is basis Without our key contract, point revenue, the XX improvement XX gross quarter. to the sales XX% which was the the margin of first a discussion a points. been have would our decline & in versus legacy Test the margin reported X.X% and has

X.X%, and to to million and million sequentially, by the was was of up throughout SG&A primarily and for restructuring $XX fiscal do other comp our had continue to expenses million in We SG&A sequentially. $XX.X seasonality million, points with which XX related expenses. We between activity. operating down X% was QX, range year proxy stock non-GAAP recent costs Our expenses various basis $XX payroll-related and margin restructuring our XXXX. $X.X driven associated primarily higher expect Non-GAAP

We approximately million structure. of in $X improve charges additional reduce excess restructuring capacity we QX continue and to and million as transition $X cost XXXX, expect to our incur to

As actions, approximately savings a we result $X million. expect of the annualized above of

cash in cash the We a was expenditures highlights. million quarter million of Slide expect few XX, turn and capital Free approximately for annualized be quarter. capital will for generated those flow working on to cash $X to where We the XXXX. flow savings operations half million. updates $XX realized first in of $XX from after I provide Please

$XXX balance million was $XXX cash XX, the available Our at with in March U.S. million

increase conversion of an from decrease December Payables million $XX Our to assets our accounts were March increase receivable an million, review balance Inventory XX December a were of March turn million, was XX, December at cycle of million from million $XX $X million at XX. Please $XXX $XXX down Contract million XX. $XX cash was XX from XX. performance. $XXX Slide quarter-over-quarter. to

XX for XX with cycle days our QX XX cash our conversion was days. within to of and consistent Our range days expectations

Turning for share were $XX capital during million. to allocation Total QX repurchases XX Slide update.

market evaluate repurchase repurchase further QX to continue will We open program. in through our

were $X.XX XXXX, share end XXXX, approximately announced of the million the share a we in million current $XXX in XXXX. cash $X.X had In quarterly available As January of March under we program. recurring March repurchase per dividend. paid dividends

for computing review everyone, XXXX guidance a our of quarter to XX And guidance. Turning Slide contract. second to our remind includes legacy the

million growth revenue million to sectors $XXX expect result continued and A&D a We range by $XXX softness. of in to semi-cap from medical as offset

earnings of is Our to in share the range expected non-GAAP to $X.XX. per diluted $X.XX be

single is QX. delayed flat second information at XX. continued a modeling ramps Slide expect to from Overall, high we customer. due to for sequential revenues the For please program up quarter, to be industrial on to program be QX turn ramp based digits A&D one in expected

up decline be customers. mid in Instrumentation, further & existing softening of semi-cap. we further In Test digits digits expect to in driven revenues medical from expect a mid-single growth double We from

traditional Turning now markets. to the

We down expect be digits. double computing to low revenues

and be Interest for other approximately assets is estimated effective $X.X to XX%. down range ramp intangible We a weighted of purposes. XXXX $XX design costs. our guidance XX% than amortization of expect with be rate another telco shares The margin one be stability operating QX impact customer million. provided softer demand does the delays is expected expense X.X% because tax and average to estimated expected is for greater of customer. are from to the The to to exclude X.X% Implied restructuring guidance and modeling and in million due

on you of the not computing at on Slide XX, end are we planning legacy the we in renewing that contract be the update transition to unaffected begun revenues XXXX, have and Finally, expect QX. to we

XXXX revenues million. second-half approximately expect We $XX be to

legacy exiting the remain computing Excluding on contract, focused waypoints our we XXXX.

activities with target still exiting result discussed Jeff legacy the that of QX. turn within the in as back expect gross and comments. excluding range. We in our our mid-X% the computing we call expect market sectors Even margins to XXXX, I’ll for be previously restructuring contract, A&D a closing both medical to mix and in our higher-value and to growth achieve revenue decline, our now SG&A,

Jeff Benck

take framework. and Roop. for to to moment I’d strategic Paul like to his first acknowledge a Tufano Thanks, our thank contributions

hone about vision, this for the month efforts We will more even focus our strategy After excited even tune our company. an build the stronger to and I’m Benchmark. going first forward potential here, my

of growth driven be integration by engineering, technology platforms. stage of Our manufacturing next and the will company’s

in people, is opportunities amazing increasing now have to and and job great execute. We our front us of capabilities

standards industry updating look the of on the I objective. cost set innovation the from over confident in call focusing to higher-margin increasing progress in excellence actions with to the we for with to turn sectors, this shareholders. even Q&A for on headwinds our team, months. and to progress our customers, our and Growth coupled the We and to coming make partners, enable you medical With benefit will on margins I’m are the on the in can with to back session. will spending, Together forward semi-cap. and operator the We that, us earnings A&D a conduct near-term immediate that employees continue drive

Operator

you. Thank

Sidoti. begin question We Instructions] session. will from Soderstrom comes ahead. [Operator Our the Please now with question-and-answer first go Anja

Anja Soderstrom

Yes. you hear Hi, me? can

Jeff Benck

Hi, afternoon. Anja, good

Anja Soderstrom

looking welcome Hi, good the afternoon. you. forward to talking Hi, to Benchmark family. with Jeff, I’m and

Jeff Benck

Yes, me too.

Anja Soderstrom

What before, that’s back context you it semi-cap thought by just it was to some see I a that First, you half the turnaround going didn’t more sort year. you seeing are mid-year? to since – wanted to pushed get of you

Roop Lakkaraju

start that. previously it throughout second with we in start I’ll second-half. the to quarter obviously the and Anja, ramping this is Honestly, Roop. recovering then Maybe expected

with guidance aspects. to understand got One, greater softening we series continue visibility that that, that areas. customers. from we basis. all a is additional longer-term for with at think, the customers are some we’ve two we that set as for provided why With advanced quarter, And this awards second think XXXX. throughout to see better sequential I of technology our up And winning time those those customers our seeking we it’s meetings from on a what our I and additional from visibility said, obviously are further such,

actions is the sequential the other taken some part capacity decline are and is to to a our action basis, right-sized softening of have. because or near-term demand we taking we’ve ensure The further that on

Jeff Benck

just I’ll to add Maybe that.

Anja Soderstrom

Sure. Okay.

Jeff Benck

I’ve to space. the customers I’m super our market. chance the in had this I bullish pretty capabilities excited ability serve team to our a have. we engage with semi-cap in general the And and about in remain differentiated on

to and Roop customers. and we’re to to But it. space, visibility. people with not to said, the to to And be area going be share have I’ve certainly talking there’s in we As forward, I’m this this more hear had looking in like here of customers, number the going of in coming some to as it’s days happy lot we’d on we’re visibility the all comments, that about to from my call talk we’ll was that’s better a the team get we feedback more that and certainly – directly our of don’t something going kind a where and an time and opportunity spend for able

Anja Soderstrom

Okay.

back? if about it’s coming it’s of than of a back like in when, it’s sort not it come to – you’re XXXX just pretty confident So going looks matter

Jeff Benck

mean, future… win well – Well, for I think design win certainly I the bode the

Anja Soderstrom

Yes.

Jeff Benck

on space. the are some technology collaboration really been And this we’ve of some sophisticated doing in relying even joint how us. customers I like …and on

others engineering we efforts there’s impressive trouble So joint think that And the some that have doing. pretty of that would background, we’re do replicating. things from my it’s some I

here. very I So about But seen we’re as pain that. potential second generally bit our you’ve from feel of quarter of a the guidance, the good feeling

but because this capability As keeping to of expect we’ve back. our said, do place, we’re it, come getting in in we front we’re certainly

Roop Lakkaraju

I’ll this Roop. maybe add just is additionally. Anja, Yes,

it’s customers we when I think think come come And they’ll have And expected matter even terms marketplace we’ll specificity in have our indicated that that to the of And to it well, to it’s come of get I we the in back. I some to that. of think do expect front provide want you said a us back. it back. timing. I We that answer be completed, be as conversations able able in of to think, we

Anja Soderstrom

should of before, issues component we you. shortage sort had that out at how forward? has you that Thank in terms the you for then quarter this Okay. And played how of going look have and

Jeff Benck

those a QX to our part especially QX, this mean, honestly, you or be I But look in contemplates supply constraints. what we time. say had into have effectively. we that And need been Yes. our I would through QX a And of it We market. shortages do I continues work – if we to any see considerations. we the will, chain patches we commodity think that component didn’t constraints, in it’s at various don’t market that. constrained guidance had or areas, those, point that’s the any – in tight we didn’t see effects in I execution, such any do as effects from But think our from

Anja Soderstrom

That was the helpful. you. then. thank getting back line I’m in Okay,

Jeff Benck

Anja. Thanks,

Operator

in like back over closing to to are I At Lisa further question the there no remarks. would [Operator Instructions] conference this turn the for any questions queue. time, Weeks

Lisa Weeks

our again to further day. any in all and everyone speaking XX We’ll good you, Thank with today. forward Have rest operator, answer we thank of joining and the to after questions, your to be you call you a days. available call look

Operator

now has attending you today’s and may disconnect. conference The for now you concluded. presentation, Thank

Benchmark Electronics (BHE) 24 Apr 192019 Q1 Earnings call transcript